427 U.S. 160 (1976), argued 26 Apr. 1976, decided 25 June 1976 by vote of 7 to 2; Stewart for the Court, Powell and Stevens concurring, White and Rehnquist in dissent. A surviving remnant of the Civil Rights Act of 1866, Title 42, section 1981 of the U.S. Code provides that all persons shall have the same right to make and enforce contracts. In Jones v. Alfred H. Mayer Co. (1968), the Supreme Court held that a closely related portion of the 1866 act, section 1982, applied to private racial discrimination in housing. Runyon extended Jones's reasoning to section 1981. It held that section 1981 prohibits private, nonsectarian schools from denying admission to African-Americans because of their race. Justices Byron White and William H. Rehnquist dissented on the ground that Jones had been wrongly decided. Justice John Paul Stevens's concurrence agreed that Jones may have been incorrect but viewed overruling Jones as too much of a step backward in overcoming race discrimination.
Runyon's application of section 1981's right-to-contract provision to private discrimination has had substantial implications for the scope of federal civil rights law. Section 1981, on its face, applies to all contracts. Armed with Runyon's holding, lower federal courts applied it to a broad range of behavior, including race-based behavior in security deposit requirements, in admissions to barber school, in banking services, in supply contracts, in amusement park admissions policy, in sales of insurance, and in dealings with mortuaries. Since, as interpreted in Runyon, section 1981 outlaws discrimination in many contexts not reached by other federal laws, it, as much as any other statute, supports the generalization that racial discrimination in the United States is unlawful. Even as interpreted in Runyon, however, there are limits to section 1981's reach. In close personal relationships such as marriage, for example, few believe that section 1981 prohibits race-conscious behavior.
Because it covers most contracts, section 1981 prohibits racial discrimination in employment and therefore overlaps with Title VII of the Civil Rights Act of 1964. This overlap and continuing concern about Runyon's interpretation of the statute led the Court to the brink of overruling it. After oral argument in Patterson v. McLean Credit Union (1989), the Supreme Court, on its own motion, requested that the parties brief and argue whether Runyon's interpretation of section 1981 should be overruled. Patterson did not overrule Runyon but held that the right to make contracts does not extend to conduct by an employer after the contractual relation has been established, including breach of the terms of the contract or imposition of discriminatory working conditions. Patterson thus severely restricted Runyon. Two years later, however, Congress passed the Civil Rights Act of 1991, which overruled Patterson's narrow interpretation of section 1981.
Theodore Eisenberg and Stewart J. Schwab, “The Importance of Section 1981,” Cornell Law Review 73 (March 1988): 596–604.